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Patrick Stockdale
Written by Patrick Stockdale | May 16, 2022

What Is A Double Top Chart Pattern?

In technical analysis, a double top pattern, also known as a "double top reversal pattern", is a bearish reversal pattern that forms on the price charts of financial markets when the price forms two prominent swing high resistance levels or peaks and then reverses from a bullish trend to a bearish trend.

It is confirmed when the price breaks below the support level, also known as the neckline, of the pattern.

The double top pattern is shaped like the letter "M" on a price chart.

Double Top Pattern Components

Double top pattern components

In order to identify a double top pattern, there are three components required.

The three components of a double top pattern are:

  • A swing high resistance level on the left: This is the first swing high level of the double top pattern that forms to the left side of the pattern. It is marked "1" on the chart above.
  • A swing high resistance level on the right: This is the second swing high level of the double top pattern that forms to the right side of the pattern. The high is at the same price area as the first swing high price. It is marked "2" on the chart above.
  • A neckline: A neckline is the swing low level before the push up into the resistance level. It is marked "neckline" on the chart above.

Drawing a double top pattern requires annotating all these components onto the price chart. The neckline of the double top can sometimes be unclear, especially during volatile market environments.

Double Top Chart Pattern Examples

Below are visual examples of the double top chart pattern.

Example Of A Double Top Pattern In The Stock Market

Double top pattern in stocks

In the daily price chart of Zoom Video Communications stock, a double top pattern formed.

This resulted in a large bearish price trend once the price breaks below the neckline level of the pattern.

Example Of A Double Top Pattern In The Forex Market

Double top forex market

In the price chart of GBP/USD, a double top formed. It leads to a very sharp decline in the price after the pattern is completed.

The bullish trend ended after the double top pattern formed and the price reversed to a bearish trend.

This shows that a double top can form in more than one market.

Example Of A Double Top Pattern On A Shorter Timeframe Price Chart

Double top pattern on short timeframe chart

In the 1-minute price chart of Barnes Group stock, a double top pattern formed.

The double top pattern caused the short-term prices of Barnes Group stock to reverse from a bullish trend to a bearish trend and it lead to a bearish move lower after the price breaks down below the neckline.

Example Of A Double Top On A Longer Timeframe Price Chart

Double top on higher timeframe chart

In the weekly price chart of Amazon stock, a double top pattern formed with a clear neckline area.

The price made two attempts to test the highs and failed. It failed and had a sharp decline in price over the following weeks.

How To Find Double Top Patterns

The methods for finding double top patterns in the markets are:

  • Browse through the price charts manually: Traders can manually scan the price charts of the markets to find double tops and annotate the price charts manually.
  • Use a double top scanner: Traders can use double top scanner software to automatically scan for double tops in the markets.

Double Top Pattern Benefits

The benefits of double top patterns are:

  • It is easy to find: New traders can easily identify and learn to find the double top pattern in the market. It only requires finding 2 swing highs and a neckline area.
  • It can help a trader capture large bearish moves: A double top pattern can help traders capture large bearish moves in the market.
  • It provides logic and understanding to the price action: A double top pattern can help a trader to understand what's happening in a market and that a potential bearish move is imminent.
  • It can help with taking profits on bullish trades: When a trader has a long position and a double top forms, it can be a signal to take profits on the trade before the bullish trend reverses.

Double Top Pattern Limitations

The limitations of double top patterns are:

  • It can require a wide stop-loss: The neckline area of the pattern is where traders enter short trades. This is usually some distance away from the stop loss level at the double top resistance area.
  • It sometimes fails: The double top pattern can fail to break down at the neckline. This can frustrate some traders waiting for the price of the market to break down into a bearish trend.

Double Top Formation Duration

The length of time a double top pattern takes to form will depend on the timeframe of the price chart used to find the patterns.

Example durations for double tops to form include:

  • 30 minutes minimum for a double top to form on a 1-minute price chart.
  • 30 hours minimum for a double top to form on an hourly price chart.
  • 30 days minimum for a double top to form on a daily price chart.

Frequently Asked Questions About The Double Top Pattern

Below are frequently asked questions about the double top chart pattern.

Is A Double Top Pattern A Reversal Or A Continuation Pattern?

A double top pattern is a price reversal pattern that signals that the price will reverse from a bullish trend to a bearish trend.

What Does A Double Top Pattern Tell You?

A double top pattern indicates that the market may reverse from bullish price action to bearish price action. The price of the market attempted to make a new high twice but failed.

Once the price breaks down below the neckline of the double top pattern, it can indicate that the market may trend much lower in prices.

What Price Chart Timeframes Can A Double Top Pattern Form On?

A double top pattern can form on any timeframe price chart from shorter-term 1 - 5 minute price charts to longer-term weekly and monthly price charts.

What Is The Difference Between A Double Top And A Triple Top Pattern?

The differences between a double top and a triple top patterns are:

  • It's construction: A double top forms when there are two clear swing high levels whereas a triple top forms when there are three clear swing high levels.
  • Length of time to form: A double top pattern takes much less time to form compared to a triple top because a double has fewer components compared to a triple top pattern.